Introduction: The EU is expected to forecast lower growth and higher inflation
Good morning and welcome to our continued coverage of business, the global economy and financial markets.
Europe’s economic outlook is deteriorating as the war between Russia and Ukraine continues to raise oil and gas prices, hamper supply chains and threaten large-scale disruption of energy supply.
This is expected to be the message of the European Commission, when it publishes its latest economic projections this morning.
These summer forecasts are due at 10 a.m. UK time, but Bloomberg has already seen a draft. It shows that the eurozone’s rise in the pandemic will be weaker than expected and that inflation will be even higher than feared, they say.
The Commission now predicts that eurozone inflation will rise to 7.6% in 2022, on average, much more than its May estimate of 6.1% for the year, due to rising energy prices.
It also expects inflation to be around 4% next year, still double the official targets, more than the May forecast of 2.7%.
Growth prospects have also weakened as rising prices affected demand, while fears of energy shortages in winter affected confidence.
Eurozone GDP will grow 2.6% this year and 1.4% in 2023, Bloomberg reports, below May’s earnings forecasts of 2.7% and 2.3%.
Forecasts could still change before they are officially released. But Valdis Dombrovskis, executive vice president of the European Commission, has already warned that there will be some downward revisions, and told reporters on Monday that:
“What we see [is that] Economic growth is proving quite resilient this year, a downward revision can still be expected and even more so for next year due to many uncertainties and risks.
“Unfortunately, inflation continues to be surprisingly on the rise, so it will be revised upwards once again.”
Europe fears that Russia will not restart the Nord Stream 1 pipeline later this month, when its current maintenance is completed. This could lead to skyrocketing bills, energy rationing and economic turmoil this winter.
Fears of recession helped bring the euro below parity with the US dollar yesterday, for the first time since 2002.
The euro has risen more than $ 1, only. European stock markets will open slightly higher after a shock yesterday when US inflation hit a new 40-year high of 9.1%.
We also get the latest real-time data on the UK economy today, as well as weekly US unemployment figures and data showing how quickly US factories are raising their prices.
The agenda
- 9.30 am BST: Bank of England credit conditions survey
- 9.30 am BST: the latest real-time indicators of economic activity and social change of the ONS
- 10:00 BST: The European Commission will publish the latest economic forecasts
- 1.30pm BST: Weekly unemployment figures in the USA
- 1.30pm BST: Measurement by the US PPI of producer price inflation
Updated at 08.05 BST
Key events:
Filters (BETA):
Key events (5) United Kingdom (6) Europe (3) London (3) ONS (2) Italy (2)
Fewer UK companies expect prices to rise as turnover drops
The number of UK companies planning to further raise prices has come down, according to the latest real-time data, as demand softens.
More than a quarter of companies surveyed by the National Statistics Office expect to increase the cost of their goods or services in August, down from the estimated 31% in April.
Energy prices continued to be the most common reason to consider it, with half of the companies saying they had paid more for goods and services last month.
The ONS also found that 24% of companies said their turnover declined in June 2022 compared to May 2022, a sign that the reduction in the cost of living is affecting the economy.
Only 13% reported that their turnover had increased, while 54% reported that their turnover was maintained.
Among the companies currently marketed, 26% expect to increase the price of goods or services sold in August 2022.
Energy prices continued to be the main factor to consider, with 37%. pic.twitter.com/SBFcbAwVG3
– National Statistics Office (ONS) (@ONS) July 14, 2022
There was also a drop in food away from home, with the number of diners sitting in the UK falling by 3 percentage points last week.
This is shown by the latest data on economic activity and social change
💳 Spending on credit and debit cards increased in the last week🌳🚏 visits to parks and traffic stations also increased.
In comparison, diners sitting in the UK fell 🍴 https://t.co/IvKHIlIrZM
– National Statistics Office (ONS) (@ONS) July 14, 2022
Updated at 10.00 BST
The pound has fallen against the dollar towards the two-year lows set on Tuesday amid political and economic uncertainty.
The pound sterling has fallen nearly half a penny to $ 1.185, but remains better against the euro at 1.1821 euros (near a two-month high).
Concerns about the global slowdown have pushed down the price of oil.
Brent crude has fallen 1% to $ 98.27 a barrel, the lowest since mid-April, amid concerns that mind-boggling inflation will force central banks to raise interest rates faster.
Brent Cru: Oil hovered below $ 100 a barrel on Thursday as warmer-than-expected US inflation data raised the prospect of a more aggressive tightening of the Federal Reserve, raising fears of a recession-slowing recession and overshadowing concerns about pic.twitter.com/6CbwXRPW9n
– B- Sections (@btramsnews) July 14, 2022
The struggle to find workers has increased the revenues of the British recruitment agency Hays, which reported the financial results today.
Hays reported a 23% increase in its fourth-quarter net rates, driven by increased hiring in the markets as companies rush to fill vacancies.
Hays, London’s largest publicly traded recruiter who hires mainly for white-collar jobs, is benefiting from rising demand for workers as economies recover from the pandemic shock.
CEO Alistair Cox said in a statement.
“Commissions and activity remained stable at high levels during the quarter, driven by good customer and candidate confidence.”
Learn more here: Hays recruiter’s quarterly rates increase with global hiring boom
Updated at 09.21 BST
An Upper Crust at Euston Station, London. Photography: James Manning / PA
The owner of the Upper Crust sandwich chain and Ritazza cafes sees no anticipated break in inflation.
SSP reported this morning that:
Together with the entire hospitality sector, we continue to face widespread and growing inflationary pressures affecting our supply chain, labor and energy costs, and are expected to remain well into the coming year.
SSP, which operates in transport centers across the UK, also raised its sales forecast, reporting that revenues continued to strengthen (around 89% of 2019 levels)
However, airport disruption, labor shortages and rail strikes in the UK are hampering recovery.
British builder Barratt has failed to meet his goal of finishing homes, as supply chain problems weigh on construction companies.
Barratt completed 17,908 homes a year through June 30, slightly below its target of 18,000 to 18,250 homes, but still returned to pre-pandemic levels.
CEO David Thomas says the company is focusing on tackling housing shortages in the UK, despite the economic challenges:
While there are clearly macroeconomic uncertainties ahead, the real estate market remains robust, our futures portfolio is strong and we have the resilience and flexibility to react to changes in the operating environment.
Barratt shares fell 2.3%, although they also exceeded adjusted earnings forecasts.
As rents rise, the UK real estate market may be cooling.
British housing prices rose at a slower pace in more than a year last month as buyer demand softened slightly, according to the Royal Institution of Chartered Surveyors.
RICS’s latest monthly home price balance, which measures the difference between surveyors reporting price rises and those seeing a drop, fell to +65 in June from a +72 revised downward in May.
UK rents are growing at the fastest annual rate in 16 years
Photography: Yui Mok / PA
Back in the UK, average private rents in Britain have reached record highs, rising by more than 20% in some areas such as Manchester.
The average rent advertised outside London is 11.8% higher than a year ago, while in the capital it is up 15.8%, according to real estate website Rightmove.
The shortage of real estate in the market is causing intense competition among tenants for what is available, while some landlords raise rates after rising interest rates.
During the period from April 1 to June 30, the advertised average asking for rent outside London hit another new record of £ 1,126 a calendar month, Rightmove said. That figure has risen 19%, or £ 177, in the two years since the pandemic began.
Here is the full story, from my colleague Rupert Jones:
Tim Bannister of Rightmove warned that imbalances between supply and demand will continue to drive up prices:
“The history of the rental market remains a high demand for tenants but there are not enough homes available to meet that demand. Last year we saw an exceptional number of tenants wanting to move and this year we have not seen no stop in this trend.
Although stock levels are starting to improve, with the highest number of new rental lists coming to market so far this June, the wide gap that has been created between the supply and demand over the last two years will take time to decline. Until then, this imbalance will continue to support demand for rent growth. This has led to our revised forecast of an 8% increase in rents requested by the end of the year from 5%.
Average private rents in the UK jump more than 15.8% in London, 20% in areas like Manchester.
The government imposes pensions, benefits, wage cuts, but does not control prices / rents.
You need price controls to check inflation and the cost of living crisis. https://t.co/HbRG3fVgHN
– Prem Sikka (mpremnsikka) July 14, 2022
According to @rightmove in central London, rents rose 21.1% and 11.8% outside London compared to a year ago, reaching a new record …